Washington Healthcare Agencies Are Practicing Medicine

The heart has four chambers, each separated by a supple valve. As people age, these valves narrow, and eventually can fail. The aortic valve often takes the brunt of the damage. Repairing it used to require risky open-heart surgery. Two years ago, after a lengthy delay, the Food and Drug Administration (FDA) approved a device called Sapien -- developed by Edwards Lifesciences (EW:NYSE) -- that allows doctors to replace a damaged aortic valve through a small incision made in a patient’s leg.

In Europe, this minimally invasive method is becoming a standard practice. In the United States, its use is being tightly controlled.

The Medicare agency has applied extraordinary rules around when, where, and how the Sapien valve can be delivered. The agency fears that the ease of the procedure will encourage more patients to opt for the device (even those patients who are suitable for the more conventional and more invasive open-heart repair). At $30,000 per valve, and $75,000 for the less invasive procedure, wider use of the new device could be costly.

Efforts to restrict new technology aren’t merely the throes of a Medicare agency grappling with the fiscal woes confronting entitlements. It’s a fulfillment of the bureaucracy’s established aspirations.

The physicians at the Centers for Medicare and Medicaid Services (CMS) have long sought authority to more firmly insert their own clinical judgment around when and how the nation’s seniors should have access to new medical treatments. They don’t think community doctors make good decisions, wasting the government’s money along the way. They believe industry marketing too easily sways doctors’ decisions.

It’s a jaded, and largely mistaken view of the clinical practice of medicine. But these sentiments increasingly fuel the agency’s bureaucratic drive. To protect patients, and lower costs, they see a role for themselves in regulating medical choices.

Medicare recently issued a “guidance” document stipulating that the CMS will limit access to new drugs and devices only to patients enrolled in a clinical study that’s sponsored by Medicare. This is after the products have already cleared FDA. The notion is that Medicare still needs more data to decide when patients should have access to new treatments, even for FDA approved uses of new products.

In the case of the aortic heart valve, CMS limited the procedure to about 50 mostly urban hospitals and required that both a heart surgeon and an interventional cardiologist had to be present in the operating room whenever the device was implanted. The presence of these two specialists, while surely idyllic, isn’t essential to ensure safety. Medicare wants to prevent the surgeons and cardiologists from each competing to do their own procedures. In this way, the agency can regulate the sort of professional competition that can advance faster adoption of technology.

But the key authority that Medicare’s staff wants is the ability to group different medical treatments under a single payment rate reflecting the price of the “least costly alternative” among the different medical options. This would give Medicare’s staff the ability to decide which treatment options are “clinically interchangeable”. If a patient wanted to use a drug or procedure that’s costs more than the cheapest available option, they’d be stuck making up all the difference themselves.

The Department of Health and Human Services issued in a lengthy report in December calling for CMS to get this “LCA” authority from Congress. There are rumors that President Obama will include it in his proposed budget this year. That effort may be moot.

The new Independent Payment Advisory Board that’s created by Obamacare and imbued with the power to set Medicare’s payment policies can probably confer the new authority on CMS without a separate action by Congress. In this way, Obamacare didn’t just centralize the regulation of insurance and payment policies inside Washington. It also helped centralize regulation of the practice of medicine.

Obamacare is premised on a belief that healthcare is costly because it’s not practiced efficiently. The President says that doctors are financially conflicted to do the wrong thing. He memorably referred to doctors who advocate heart procedures like pacemakers when a “pain killer” might suffice, or needless tonsillectomies that were performed only because doctors were greedy.

The problem is that Washington agencies like Medicare are not ordinary payers. What they decide bleeds into the private market as insurers mirror the federal coverage rules. The Obamacare plans are certain to follow these dictates. This creates a bottleneck to new products. It shuts out innovation. Medicare’s remote position means patients have little recourse. The agency’s skeleton coverage team of 20 physicians and its lack of scientific rigor means decisions turn mostly on cost.

The medical professional groups that nominally represent practicing doctors are surrendering. In some recent cases, the studies that CMS is requiring as part of its increasingly stingy coverage of new medical products are being run by these same medical societies. That can be a lucrative side business for these groups. The political bureaucracy knows how to use its power to co-opt key constituencies.

Another tactic? CMS makes so much preemptive noise around its displeasure of new innovations that doctors and manufacturers offer the agency “voluntary” restrictions on how they’ll market and use new products as a way to win a minimum level of coverage. That sort of bureaucratic persuasion has long been the standard fare in Europe, where payment authorities like Britain’s National Health Service use preliminary coverage denials to extract lasting concessions on price and medical practices. In the U.S., it was how CMS secured the restrictions on the aortic valve.

Some observers sense this sort of tactic is behind the pre-emptive opposition of a Medicare advisory panel to Eli Lilly and Company’s (LLY:NYSE) imaging agent for the early detection of Alzheimer’s disease. The diagnostic screening test, which uses imaging scans, has broad support among patients and doctors. But Medicare is worried about the potential for more widespread use, and the costs.

Observers now expect the product’s manufacturer Lilly, patient groups, and doctors to advance some kind of concessions to CMS on how the new technology will be used in order to secure from Medicare at least some kind of limited, initial coverage.

In the case of the Sapien valve, CMS started calling its restrictions to more tightly regulate the use of this new device “rational dispersion.” Remember that phrase, because it’s the new Washington euphemism for rationing.

There’s nothing wrong with those financing healthcare to take interest in its value. Ideally, patients who are empowered to weigh the incremental costs for themselves should make these decisions. But Obamacare seeks to further insulate patients from many of these cost considerations at the same time that the legislation deliberately places these same considerations in the hands of Washington agencies.

Left out of the discussion, of course, are the patients. They aren’t party to the backroom wrangling that’s shaping the rules on how and when new technologies are accessed. They can’t be bought off, either. They can only get short changed.

Scott Gottlieb, MD: I’m a physician and a Resident Fellow at the American Enterprise Institute in Washington. I previously worked at the Food and Drug Administration as the agency’s Deputy Commissioner and before that, as a senior official at the Centers for Medicare and Med...